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News Flash-SEC Considers Requiring Hedge Fund Inspections

The Securities and Exchange Commission reportedly is considering subjecting hedge funds to routine inspections. The SEC is particularly interested in reviewing hedge funds' trading strategies, although the SEC reportedly does not want to publicly disclose these trading strategies. The SEC is expected to release the findings of its investigation of the $600 billion hedge fund industry by the end of this month or early next month.

As the SEC had previously indicated it was not interested in regulating hedge funds' trading strategies, this would be a shift in focus and was possibly provoked by New York State Attorney General Eliot Spitzer's settlement against hedge fund Canary Capital Partners and investigation into Bank One Corp., Bank of America's Nations Funds, Janus Capital and Strong Capital.

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